Record Retail Participation Helps LIC IPO Sail Through
LIC IPO defied the long-held notion that foreign institutional investors are needed to help such large offers sail through.
Life Insurance Corp.’s initial public offering defied the long-held notion that foreign institutional investors are needed to help such large offers sail through.
As uncertainty prevails and foreign funds stayed largely away, one category drove demand for LIC’s share sale—retail. A cohort of investors that triggered an unprecedented rebound in stocks after the pandemic lows.
The retail interest in LIC IPO is in contrast to their waning participation in the second market of buying and selling shares. The category net purchased stocks worth Rs 7,100 crore in March, about half the level in February, according to NSE data. That comes when global uncertainty has roiled equity markets.
Yet, by the time LIC IPO closed on May 9, retail applications had crossed a record 73.3 lakh. The previous high was 46.44 lakh applications received for 2008 Reliance Power Ltd.’s IPO.
Even the most subscribed IPO of Nykaa, or FSN E-Commerce Ventures Ltd., generating a demand of Rs 2.43 lakh crore, received 29.5 lakh retail applications, according to numbers compiled by Primedatabase.com.
The LIC IPO saw a total demand of 2.9-times.
Retail investors subscribed nearly 2 times the shares on offer, employees bid for 4.3 times the shares set aside for them, while the portion allocated to policyholders generated a demand of 6.05 times.
Policyholders got a discount of Rs 60 per share, while retail bidders and employees will pay Rs 45 apiece below the issue price.
Over 2 crore policyholders that had linked their PAN card with policies rescued the LIC IPO. The 10% of the issue—or shares worth over Rs 2,000 crore—reserved for this category received more than sixfold demand of over Rs 12,000 crore.
The institutional portion, especially foreign portfolio investor segment, was not fully subscribed. The QIB portion was subscribed 2.8 times on demand from domestic banks and insurance. Mutual funds, which subscribed to 71% of the anchor book, showed very little demand in the IPO. The anchor allocation is locked up for 30 days after SEBI offered a relaxation.
The non-institutional category, including corporates and high-net-worth individuals, was subscribed 2.9 times.
Cushion Against FPI Outflow Thins
Foreign investors stayed away as Russia’s war in Ukraine has amplified global market uncertainty. They continue to pull out of Indian equities in their worst selloff ever.
Till now, retail investors acted as a cushion. But as they move to the IPOs, hunting for listing-day gains, the markets will find it harder to sustain despite foreign outflows.
Net investment into stocks by the retail category more than doubled to nearly Rs 1.65 lakh crore in FY22. Yet, month-on-month, investments fell from Rs 14,000 crore in February to Rs 7,100 crore in March.
Gross average monthly inflow by retail investors stood at Rs 4.89 lakh crore in January-March compared with FY22 average of more than Rs 5.68 lakh crore.
The average daily turnover of the category in the first three months stood at Rs 62,252.7 crore compared with FY22 average of Rs 66,200.2 crore.
LIC, itself the biggest counterparty in India during selloffs, is not so active given its IPO. And domestic banks and insurance have already parked their surplus cash in the LIC IPO.
Domestic mutual funds, too, have used their net inflows to subscribe to the LIC anchor book and the IPO.